Essay On Keynesian And Monetarists

Keynesian and Monetarism economic theories differ on some issues such as the significance of interest rates and agree on others. Keynesian economics is a set of theories which describe how during recession and short run eventualities when economic output is under influence from aggregate demand or the total expenditure in the economy. Monetarism on the on the other hand is an economic theory that focuses on macroeconomic effects of central banking and the supply of money. The theory asserts that the excessive expansion of the money supply is in itself inflationary. It adds that the monetary authorities ought to focuses on maintaining the stability of process.
It is FALSE to state that the important difference between monetarists and Keynesians is how long they think the long run actually is. Monetarists think that the Long Run (LR) is longer than the Keynesians do. This is so because Keynesians think that the LR is a long time. As such, the Keynesians are of the stand that fluctuations in prices and output ought to be offset by policy.
Largely, the main difference between Keynesians and market monetarists emanates from interest rates. Many market monetarists favor allowing the market to control and set the interest rates. They are against the central bank controlling the interest rates. For instance, the market monetarists are against the quantitative easing as a way of lowering the long-term interest rates. Keynesians on the other hand believe that the only thing of importance to economics is largely the interest rates. The Keynesians claim that the demand for money is not only subject but also highly sensitive to changes in interest rates.
It is evident that the two parties conflict over interest rates but concerning how each thinks about the long run the difference is not pronounced. The issues of the long run are dependent on the degree of wage rigidity which influences private expenditure and government expenditures.